Fiscal goals aside, infra push to support growth

Fiscal targets could be missed by the government but its focus on improving infrastructure and education will be supportive of economic growth, BMI Research said.

“The Philippine government has proposed a P3.77-trillion budget for 2018, which marks a 12.4 percent increase from 2017. Although the projected targets seem overly-ambitious, we believe that the government’s focus on infrastructure and education spending will be supportive of growth over the short and long term,” BMI said in an analysis on Monday.

President Rodrigo Duterte has certified the proposed P3.77-trillion budget for next year as urgent, which would allow Congress to expedite its enactment.

Based on government estimates, the 12.4 percent increase in the budget from a year earlier would account for 21.6 percent of 2018 gross domestic product (GDP) and result in a deficit equivalent to 3 percent of GDP.

BMI forecasts the deficit as a share of GDP to increase hit 2.9 percent in 2018, up from a projected 2.7 percent in 2017, with revenue and expenditure as a share of GDP likely to reach 15.5 percent and 18.4 percent, respectively.

The Duterte government plans to spend around P9 trillion for infrastructure under the “Build Build Build” program.

It aims to increase infrastructure spending as a share of GPD to 5.4 percent in 2017 and 7.4 percent by 2020, compared with the average of 2.9 percent during the Aquino administration from 2010 to 2016.

“Given the severity of infrastructure constraints, we believe that government efforts to boost infrastructure spending, aided by a more transparent public tendering process, will help to significantly improve the business environment and competitiveness of the economy, which will in turn support growth in the coming years,” BMI said.